Bipartisan deal would delay flood-insurance rate increases

Critics oppose subsidies for risky locations

Oct. 30, 2013

Residents use a boat to get back to their house on Grantwood Drive in Toms River on Oct. 30, 2012 — a day after superstorm Sandy pummeled New Jersey. Many homeowners have since faced sharp increases in flood insurance. / PRESS FILE PHOTO

Written by

Malia Rulon Herman

@mrulon

WASHINGTON — New Jersey homeowners facing steep increases in their flood insurance rates would get some temporary relief under legislation announced Tuesday by Sen. Robert Menendez and other key House and Senate lawmakers.

The bill, introduced on the one-year anniversary of superstorm Sandy, would grant a retroactive delay in premium increases that took effect Oct. 1 for millions of consumers covered under the National Flood Insurance Program. The delay would last about four years from the date of the bill’s passage.

“We’ve suffered from a natural disaster; we need not create a man-made one,” Menendez, D-N.J., said during a news conference at the Capitol.

Under a 2012 law known as Biggert-Waters, flood-insurance premiums are set to rise 25 percent each year for four years to make up for deficits caused by massive storms like Hurricane Katrina and to bring the program more in line with its real costs.

Menendez said the combination of updated flood maps and the phase-out of premium subsidies “threatens to force victims out of their homes and destroy entire communities.”

“This will drive down property values and local revenues at the worst possible time,” Menendez said.

The flood insurance program, run by the Federal Emergency Management Agency, traditionally has charged premiums at about 40 percent to 45 percent of their full cost, with taxpayers subsidizing the rest.

The bill would delay certain pieces of the law until FEMA completes an affordability study, proposes solutions and reworks its flood-mapping approach to utilize “sound scientific and engineering methodologies,” according to Menendez.

It would apply to primary residences that have not been repeatedly damaged by flooding, to properties sold after July 6, 2012, and to people who purchased a new policy after that date.

Joe Castelli of Middletown said the premium increases have affected his entire community. He welcomed the news of the legislation but was skeptical it would solve the problem.

“Obviously, a delay and an affordability study are what I would call good first steps,” he said. “But the federal government’s idea of affordable and my idea of affordable are probably a good ways apart.”

A House version of the bill also was introduced Tuesday by Democratic Rep. Maxine Waters of California and two New Jersey lawmakers, Republican Rep. Frank LoBiondo and Democratic Rep. Bill Pascrell.

Waters, co-author of the 2012 Biggert-Waters law, said her legislation was “never intended to create this type of premium increases.”

LoBiondo said the bill “balances the goal of making the (National Flood Insurance Program) solvent with the real financial concerns of those facing steep premium increases and protecting the taxpayers’ interest.”

Some watchdog groups, however, say taxpayers should not help subsidize insurance for people who buy property in flood-prone areas.

Steve Ellis, vice president of the nonpartisan Taxpayers for Common Sense, told a Senate panel last month that the National Flood Insurance Program is financially unsustainable. It takes in about $3.6 billion in annual premiums and owes the Treasury roughly $25 billion.

“It may be politically expedient and popular locally to delay,” Ellis told the Senate panel. “But what may make good local politics generally makes bad insurance policy. People deserve to know the cost and risks of where they live. And taxpayers deserve to have those who choose to live in harm’s way pick up their share of the tab.”

New Jersey Sierra Club Director Jeff Tittel agreed. He said delaying the insurance hikes would encourage people to build in unsafe areas, putting themselves in danger while also threatening to sap additional federal dollars.

“The purpose was for insurance to not be subsidized and to pay its own way because when insurance gets subsidized, it leads to insurance of bad planning that puts people in harm’s way,” he said.

Biggert-Waters eliminated certain subsidies that helped homeowners keep their flood-insurance policies affordable. When the subsidies expired Oct. 1, residents began to see their rates increase drastically.

Lawmakers supporting the bill to delay the increases said Tuesday they want the measure to be retroactive, so rates would revert back to previous levels.